AEW Europe has made its Manchester debut by exchanging contracts to buy one of the most prestigious development opportunities in the city for £31.7m – a 6.4% yield.
The investment manager has topped a list of international private equity and UK propcos to buy 101 Barbirolli Square from Aberdeen Asset Management.
PwC and DLA Piper will vacate the 83,700 sq ft block in 2017, enabling AEW to upgrade, refurbish and extend the building.
AEW was attracted by the rebounding of the Manchester office market and the recent circulation of requirements from tenants including law firm Freshfields, insurer Aviva and central government.
H1 take-up of 680,000 sq ft in the city centre was down on the record 800,000 sq ft of the previous year but still well above the long-term average, according to the Manchester Office Agents Forum.
Barbirolli Square, which is adjacent to the Manchester Conference Centre, was the most sought-after address in the city when it was built in the 1990s. The neighbouring 100 Barbirolli Square is also being targeted by developers keen to lead the rejuvenation of the area.
SWIP sold the 140,000 sq ft 100 Barbirolli Square in July 2013 for £41m to Moorfield Group and Oaktree Capital Management.
Tenants including PwC, EY, DLA and Addleshaw Goddard occupied the two blocks, but have now arranged moves to new-builds at 1 Spinningfields and 1 and 2 St Peter’s Square.
Aberdeen conceived its own refurbishment scheme in 2014, but this was scrapped in favour of a sale, with CBRE instructed in May to seek £25m for the block.
JLL capital markets director James Porteous said overseas demand for Manchester capital had compressed prime yields by 100 basis points over the past year – a trend set to continue over the next five years.
